Hess' (HES) Guyana Oil Assets Spark Major Energy Sector Dispute
Hess Corporation HES has found itself at the center of a significant corporate tug-of-war over its lucrative oil assets in Guyana.
The company’s proposed sale of its 30% stake in the Stabroek Block, a major offshore oil project, has triggered a contentious battle among some of the biggest names in the American oil industry.
Exxon Mobil Corporation XOM filed an arbitration claim with the International Chamber of Commerce in Paris, asserting its right of first refusal over Hess’ share in the Stabroek project. This legal maneuver is aimed at potentially blocking Chevron Corporation’s CVX ongoing $53-billion acquisition of Hess, indicating ExxonMobil’s interest in countering the deal.
The filing underscores ExxonMobil’s intention to consider a bid for Hess’ interests in the Stabroek Block, which houses the largest oil discovery in recent decades. This move could disrupt Chevron’s planned purchase, especially since Chevron has stated that it will abandon the entire acquisition if it cannot secure Hess’ portion of the Stabroek Block.
This escalating dispute is not just concerning for the involved corporations but also affects several hedge funds, which invested heavily in arbitrage opportunities on the successful closure of Chevron’s deal with Hess. The public spat represents a significant upheaval in the industry, showcasing the strategic value placed on the Guyana assets.
The Stabroek Block has been a crown jewel for Hess, drawing massive interest from global energy players due to its vast oil reserves. ExxonMobil’s aggressive step to potentially secure Hess’ assets underscores the block’s strategic importance in the global energy market.
While the immediate prospect of ExxonMobil acquiring the 30% stake from Hess seems slim, given Chevron’s stance to withdraw from the transaction if unsuccessful at arbitration, the situation remains fluid. Darren Chapman, presumably a key figure in this narrative, has not dismissed the idea of ExxonMobil eventually acquiring the stake, hinting at a possible long-term strategic play.
As the battle unfolds, Hess stands to pay a significant break-up fee of $1.7 billion to Chevron if the deal collapses. The outcome of this corporate struggle will have far-reaching implications not only for the companies directly involved but also for the broader dynamics of the international energy sector, particularly in the rapidly developing oil-rich region of Guyana.
Zacks Rank & Stock to Consider
Currently, Hess carries a Zack Rank #3 (Hold).
Investors interested in the energy sector might look at the following company that presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
RPC Inc. RES derives strong and stable revenues via diverse oilfield services that include pressure pumping, coiled tubing and rental tools. In 2023, the company paid out $34.6 million in dividends, whereas share repurchases totaled $21.1 million.
The Zacks Consensus Estimate for RPC’s 2024 and 2025 EPS is pegged at 88 cents and $1.13, respectively. The company has a Zacks Style Score of A for Growth and Value.
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